What's Happening?
Starting next July, a new earnings test known as the 'Do No Harm' standard will determine colleges' access to federal student loans based on graduates' earnings. Programs whose graduates earn less than
an adult without a high school diploma could lose loan access. This change aims to hold degree programs accountable, but undergraduate certificates are currently exempt. The Biden administration's gainful-employment rule, which applies to certificate programs and for-profit colleges, uses a similar earnings test. The Department of Education is set to discuss these rules in upcoming negotiations, with gainful employment expected to be a contentious topic.
Why It's Important?
The new earnings test represents a significant shift in federal accountability for higher education, potentially affecting funding for many programs. It aims to protect students from high tuition costs without a guaranteed return on investment. However, the exclusion of undergraduate certificates from the test raises concerns about their accountability. The outcome of these regulations could impact the financial viability of many educational institutions, particularly for-profit colleges, and influence the distribution of federal aid, affecting millions of students.
What's Next?
The Department of Education will engage in a months-long rule-making process to finalize the details of the 'Do No Harm' standard and the gainful-employment rule. This process will involve negotiations with various stakeholders, including educational institutions and policy experts. The discussions are expected to be contentious, particularly regarding the application of accountability measures to certificate programs. The outcome will determine how federal aid is allocated and could lead to significant changes in higher education funding and program offerings.
